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MGM Mirage might face bankruptcy filing

By HOWARD STUTZ LAS VEGAS REVIEW-JOURNAL

MGM Mirage (MGM), the Strip's biggest casino operator and the state's largest private employer, could be facing a bankruptcy filing if it can't renegotiate better repayment terms with its lenders covering some $7 billion in loans.

In a filing Tuesday with the Securities and Exchange Commission, the company that operates 10 Strip resorts and is building the massive $9.1 billion CityCenter, said it was discussing various waivers or amendments with its lenders.

MGM Mirage said it would be in default under its senior secured credit facility if it can not negotiate a better repayment structure. The action could filter down and put all of MGM Mirage's debt, which totals roughly $13.5 billion, into default.

In the filing, the company blamed the recession and the steep drop in consumer spending at casinos for its concerns about not being able to make its debt payments.

"If (MGM Mirage) is unable to negotiate such a waiver or amendment, a majority of the lenders under the senior credit facility could accelerate repayment of borrowings ... cross defaults could be triggered," the company wrote in the SEC document.

Wall Street has begun speculating that MGM Mirage might have to file for Chapter 11 bankruptcy protection in order to force a restructuring of its bank loans and corporate debt.

MGM Mirage also has been seeking the final $1.2 billion in financing to complete CityCenter, which is scheduled to open in October. The 4,004-room Aria, CityCenter's centerpiece hotel-casino, is scheduled to open in December.

"Many lenders are not being flexible with gaming operators. ... We believe MGM Mirage is going to have significant difficulty in reaching an agreement with its respective banks," Macquarie Securities gaming analyst Joel Simkins told investors. "Unfortunately, in a worst-case scenario, should MGM Mirage need to restructure, we believe this tipping event will place another cloud over the sector."

Simkins worried the stock prices of other casino operators, including Wynn Resorts and regional casino operators, would suffer. Shares of MGM Mirage sunk to a 52-week low of $2.62 on the New York Stock Exchange on Tuesday, down 43 cents or 14.1 percent.

On Monday, JP Morgan gaming analyst Joe Greff reduced his estimates for MGM Mirage's quarterly revenue and cash flow. He alluded to a potential company restructuring.

"We would not rule out a (bankruptcy) filing as the ultimate, and perhaps only, lever from which MGM Mirage can negotiate with its banks, at least until asset sales are announced," Greff said in a note to investors. "We believe the company is in active discussions with potential buyers of Strip assets to raise capital and had hoped that it would report any progress there with its fourth-quarter results."

In December, MGM Mirage agreed to sell Treasure Island to former New Frontier owner Phil Ruffin for $775 million. The Gaming Control Board is expected to take up the matter today.

"We're engaged in ongoing discussions with our lenders," Feldman said. "Today's filing doesn't affect CityCenter. It's business as usual. We're focused on providing an unsurpassed experience for every one of our guests."

MGM Mirage notified the SEC it was delaying its year-end report for several weeks. The company said it was still assessing its financial position and liquidity needs because souring economic conditions have impacted MGM Mirage's operating results.

Last week, MGM Mirage borrowed the remaining $842 million from its revolving line of credit to pay for general corporate purposes. Feldman said the company now has more than $1 billion in cash on its balance sheet.

Like other casino operators, MGM Mirage has undertaken numerous cost-cutting measures during the past 14 months in order to bring expenses into line in light of sinking revenues and cash flow.

The biggest drain has been CityCenter. The project's Harmon Hotel, was scaled back and delayed until 2010.

Dubai World, the investment arm of the Persian Gulf state, invested almost $6 billion in the company in 2007 to acquire half ownership in CityCenter and almost 10 percent of MGM Mirage.

Deutsche Bank gaming analyst Bill Lerner said at an investors conference in New York that MGM Mirage will take a number of steps to shore up its finances before a restructuring. The company has properties in Detroit and Biloxi, Miss., along with several Strip casinos, that could be put on the market. He said MGM Mirage and Dubai World might sell part of CityCenter.

"They could sell a hotel tower or a residential hotel tower to a hotelier," Lerner said, adding the company has enough liquidity to resolve its 2009 and 2010 debt maturities, which total about $2.1 billion.

"(The company) needs to quell concerns that they are going out of business," he said.

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